Morgan Stanley hikes price target on Tesco, shares snap higher
Supermarket operator Tesco has scope to materially improve its UK operations.
Food & Drug Retailers
4,013.60
16:54 03/05/24
FTSE 100
8,213.49
16:59 03/05/24
FTSE 350
4,515.50
16:54 03/05/24
FTSE All-Share
4,469.09
17:14 03/05/24
Tesco
298.30p
16:35 03/05/24
Together with moves to optimise its portfolio, that should drive the shares to outperform over the next 12 months, Morgan Stanley analyst Edouard Aubin told investors on Monday morning.
In particular, the broker highlighted how French grocers had successfully allied themselves with manufacturers of branded goods to improve their price positioning. That can have a very powerful impact by making hard discounters’ private label products less appealing.
With the company’s operating margins in terms of earnings before interest and taxes set to return to 3.5% by fiscal year 2019 Aubin decided to hike his price target on the company’s shares to 260p from 155p.
As well, Morgan Stanley argues that if the company were to hive off all its international assets then the “stub” could still be worth as much as 330p. Rationalising its international assets, like some of its competitors have done, would allow it to undertake the investments necessary to improve its customer proposition.
The broker’s recommendation on the stock was upped to overweight from equalweight.
As of 09:06 shares of Tesco were pacing gains on the top flight index, advancing by 2.88% to reach 225p.